Apart from Trump trade war, the market was also concerned about a Trump cold war, be it with China or Russia (recent US/Trump withdrawal from the nuke treaty) coupled with ongoing Saudi-Khashoggi “thriller”. Last week, FPIs reportedly dumped more than $1 billion worth of Saudi stocks.

On Monday, the Dow and S&P failed to hold the overnight future gain amid Italian rating and Chinese stimulus optimism as Europe nosedived in late trade on renewed Italian budget concerns. In the EU session, the Dow future soared by over 100 points, but after the opening bail, it’s slumped by over 100 points as Europe and the Italian market slips into red after Italy refused to budge on the EU “request” to lower the fiscal deficit in its official response to the EU.

On Monday, USD also surged on European woes as EUR was in pressure on Italian budget aftershocks and German GDP growth worries, while GBP slumped on never-ending Brexit squabbling. USDJPY jumped +0.26%, EURUSD tumbled -0.40%, while GBPUSD plunged almost -0.77% and the US dollar index (DXY) jumped +0.36%, affecting the overall US market sentiment to some extent. The US 10Y bond yield is almost flat around 3.19%, but sustaining above the 3.10-3.15% range and is also affecting the overall market sentiment on higher borrowing costs.

On Monday, the Dow Jones Industrial Average (DJ-30) stumbled -0.50% (-127.61) to 25316.73 led by Goldman Sachs. The broader S&P 500 (SPX-500) slumped -0.43% (-11.98) to 2755.80 on banks & financials, while the tech-heavy Nasdaq Composite (IXIC) inched up +0.26% (+19.60) on the boost of Apple, Amazon, Intel, and Microsoft on hopes of blockbuster earnings. Toymaker Hasbro plunged on the terrible report card. Big banks including JPM, City all tumbled on loan growth worries and a high probable global economic slowdown, led by China.

On late Monday, Trump said he is 'not satisfied' after a talk with Saudi Crown Prince Mohammed bin Salman (MBS). President Trump on Monday said he spoke to MBS about Khashoggi, but reiterated he has doubts about the kingdom’s account of the dissident journalist’s killing. But Trump is also cautious about the Saudi purchase of US military equipment and thus can’t do any serious economic sanction. In other words, although Trump changed the Saudi version from “credible” to “doubtful” amid increasing domestic pressure to act, he will not take any real action on MBS & Co even after a cold-blooded planned murder.

Trump now sees China as one of its arch-rival in the military business apart from Russia, where the US is enjoying supremacy. Trump now also want to stimulate the US growth through a surge in defense spending. Thus he is trying to reignite cold war-2 as he threatens a renewed nuke buildup.

Trump said on Monday that the US would increase its nuclear arsenal until other nations "come to their senses," threatening an arms race days after he said he would withdraw the US from a Cold War nuclear treaty. Trump said, in an indirect reference to China and Russia: "Until people come to their senses, we will build it up”. Trump announced over the weekend that he intended to pull the US out of the Intermediate-Range Nuclear Forces Treaty with Russia and accused Russia of violating the deal. Trump repeated on Monday that Russia had not adhered to the Cold War-era treaty and said his vow to increase the US nuclear stockpile included a posture against China as well.

Technical View (SPX-500):

Technically, SPX-500 has to sustain over 2745 for a further rally to 2770*/2795-2815/2845 and 2875/2890-2905/2925 in the near term (under bullish case scenario).

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